Question

Rocky Mountain Camping Equipment, Inc. has established the following direct-material standards for its two products.

Answer 1

Answer: Please see explanation column for answer

Explanation:

TENT TYPE---STANDARD  CAMPING TENT

Standard camping tent 21 yards $9.50 per yard

Actual qty purchased in yards = 5900

Actual qty used= 2670

Standard Price= $9.50

Standard quantity yards =290x21= 6090 yards

Actual price per yard= $22,420/5900=$3.8

TENT TYPE---DELUXE  BACKPACKING TENT

Deluxe backpacking tent 16 yards $7.60 per yard

Actual qty purchased in yards =2900

Actual qty used= 1480

Standard quantity yards =370X 16= 5920 Yards

Actual price per yard= $14,500/ 2900= $5

Standard price= $7.60

A) To find Direct Material Price Variance

For Standard  Model

Actual quantity purchased x Actual price=5900x3.8=$22,420

Actual quantity x Standard price=5900x9.50= $56,050  

Direct Material Price Variance which is favourable is given by $56,050 - $22,420= $33, 630

For Deluxe

Actual quantity purchased x Actual price= 2900x 5.0= 14,500

Actual quantity x Standard price=2900x7.60=$22,040

Direct Material Price Variance which is favourable is given by = $22,040-14500=$7540

TOTAL DIRECT MATERIAL PURCHASE  PRICE VARIANCE = $33,630-$7,540=$26,090

B) To find Direct Material Quantity Variance

For Standard  

Actual quantity x standard price= 2,670x $9.50=$25,365

Standard quantity x Standard price=6090x9.50= $57, 855

Direct Material Quantity Variance which is Favorable is given by $57,855-$25,365= $32,490

For Deluxe

Actual quantity x standard price= 1480 x $7.60=$11,248

Standard quantity x Standard price= 5920 x $7.60= $44,992

Direct Material Price Variance which is Favorable is given by $44,992 -$11,248= $33,744

TOTAL DIRECT MATERIAL QUANTITY VARIANCE = $33,744-$32,490 =$1254

Journal to record purchase of materials and incurred price variance

March

Raw materials inventory ----Debit  78,090……….(5900x9.50  + 2900x7.60)

Direct Materials price variance-----Debit $26,090

Accounts Payable----------------Credit $36, 920……..($=$22,420+14,500 )

Journal to record use of direct materials  and Incurred price variance

March

Work in progress inventory ----Debit  102,847 ……….(6090 x$9.5 + 5920 x 7.60)

Direct Materials quantity variance-----Debit $1254

Accounts Payable----------------Credit $36,613……. .....(2670 x 9.5+ 1480 x 7.60)